7 indicted in fraud at surety brokerages Seven accused of swindles on contracts.

May 10, 1991|By Kelly Gilbert | Kelly Gilbert,Evening Sun Staff

Federal prosecutors in Baltimore have filed criminal charges against seven men connected to two former Maryland surety brokerages that secured bonding for contractors and subcontractors involved in government construction work.

The false statement, false claims and wire fraud charges are contained in grand jury indictments against the seven, who are out-of-state businessmen and self-styled entrepreneurs.

Assistant U.S. Attorneys Susan M. Ringler and Stuart A. Berman said the indictments are the products of a continuing investigation by the FBI, the Army Criminal Investigation Command, the Defense Criminal Investigative Service and the inspectors general of several federal departments.

The probe so far has focused mainly on alleged swindles involving government contracts bonded through two brokerage companies that operated in Silver Spring and Bethesda in the mid-1980s. But officials said the contract bonding problem is nationwide in scope, and that more indictments are expected.

Each of the indictments here charges one or two defendants with falsifying affidavits and other documents in which they claimed assets worth millions of dollars to back surety bonds for contractors on government jobs.

In fact, the defendants allegedly were insolvent or had net worths far below what they listed in the official documents, and apparently signed the papers only to collect fees -- usually $40,000 to $75,000 -- for serving as "individual sureties."

Ringler said no contractor "completely defaulted" on any job. But

some partial defaults already have led to civil litigation and the risk that government agencies could be stuck with the cost of defaults because the individual sureties are unable to pay off.

The indictments alleged that the seven defendants collected bonding fees from United Capital Exchange Inc., in Silver Spring, or from United Funding & Investment, in Bethesda, for acting as individual sureties.

Royal, Bradshaw, Harris and Stephan Smith are the subjects of federal bench warrants issued by judges here after they failed to appear for scheduled arraignments.

Jobs insured by the bonds included the $7.9 million construction of 140 Army family housing units at Aberdeen Proving Ground; a $1.9 million roofing project at the Navy's David Taylor Research Center in Bethesda; and other work for the National Aeronautics and Space Administration, the Interior and Agriculture departments, the Army Corps of Engineers, the National Park Service, the General Services Administration and the Smithsonian Institution.

Ringler said United Capital Exchange went out of business in 1989, and United Funding & Investment went out of business in Maryland in 1989 or 1990.

She said United Funding & Investment reopened in Jacksonville, Fla., but it is unclear whether the company is still operating there.